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PLEASE DONT WRITE THIS IN EXCEL, PLEASE BY TYPING OR HANDWRITING, Thanks! = 7. [10 marks] John borrows 1000 for 10 years at an annual
PLEASE DONT WRITE THIS IN EXCEL, PLEASE BY TYPING OR HANDWRITING, Thanks!
= 7. [10 marks] John borrows 1000 for 10 years at an annual effective interest rate of i(1) 10%. He can repay this loan using the amortization method with payments of P at the end of each year. Instead, John repays the 1000 using a sinking fund method as follows. At the end of each year John pays the interest on the loan, which is charged at i(1) = 10%. Moreover, he needs to make deposits to the sinking fund, which are equal to P minus the interest on the loan and are made at the end of each year for 10 years. The sinking fund pays an annual effective rate of i(1) = 14%. Determine the balance in the sinking fund immediately after repayment of the loan. Hint: the deposit in the sinking fund in this question is not the usual one discussed in the Mobius lecturesStep by Step Solution
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